Guilty plea, finally, in Reserve Bank bribery case

By Nick McKenzie & Richard Baker

21 May 2018 — 4:42pm

A former Reserve Bank company executive has pleaded guilty to criminal charges in one of Australia’s most protracted corruption prosecutions over a payment to a Malaysian arms dealer to grease the wheels of a business deal.

The guilty plea is a silver lining for prosecutors in a case marked by extensive delays and legal challenges.

Mr Kayum is an arms broker with connections to some of Malaysia’s most powerful political figures and has previously been suspected of involvement in the nuclear weapons black market.

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Mr Gerathy is one of several former executives of the Reserve Bank's currency firms Securency and Note Printing Australia who in 2009 became the subject of a criminal investigation by the Australian Federal Police following reports in The Age about an alleged international bribery racket involving senior overseas politicians, officials and the RBA.

The charging of Mr Gerathy in 2011 was the product of this AFP operation, codenamed Rune. It marked the first time in Australia that police had sought to hold a business person to account for bribing a foreign official.

Abdul Kayum Syed Ahmad.

Almost seven years after Mr Gerathy was charged with multiple bribery offences, he pleaded guilty to a single false accounting charge, albeit one which carries a jail term of up to ten years. Mr Gerathy will be sentenced on May 30.

The investigation into the RBA firms has also become notable for the failure of ASIC to pursue any of the company directors who, according to leaked board papers and memos, approved the hiring of Mr Kayum, despite warnings he was likely to be corrupt.

The non-executive board directors who approved the use of Kayum as a commission agent by the RBA firms and who include former high ranking public servants and senior business figures were subject to a perfunctory investigation by corporate watchdog which led to no outcomes.

The ability of ASIC to pursue those in the banking sector engaging in suspect behaviour has come under fierce scrutiny during the ongoing royal commission into the financial services industry. The commission has no connection to the RBA currency firm prosecutions.

Court papers reveal that Mr Gerathy was accused of having acted “without any belief that Aksavest [Abdul Kayum’s company] was legally entitled to make a debit note describing costs payable as related to marketing and other expenses in the amount of $79,502.00.”

When the payment described in the fraudulent invoice was made to Mr Kayum, he was lobbying senior Malaysian politicians and officials to buy the RBA’s plastic banknote technology.

Prior to his guilty plea on Monday, prosecutors had intended to rely on emails and other communications showing that Mr Gerathy knew that Mr Kayum was not entitled to the “marketing” funds.

His defence lawyers were hoping to argue that while Mr Gerathy had created a false invoice, he had done so in the belief that Mr Kayum was entitled to payment. However, on Friday, the Supreme Court ruled that even if this was so, the charge of false accounting related only to the act of dishonestly creating the invoice rather than the question of whether the recipient of the funds should be paid them.

The AFP launched Taskforce Rune after The Age exposed its earlier failure in 2008 to investigate the payments made to Mr Kayum by the RBA firms. Mr Kayum and Mr Gerathy were arrested by Australian and Malaysian authorities as part of a coordinated international operation in 2011.

The work of Taskforce Rune was once promoted by authorities as an example of the ability of agencies in Australia to confront serious alleged corporate corruption. However, the prosecution of Mr Gerathy has over several years raised serious questions about the capacity of the Australian criminal justice system to handle complex financial crime cases.

The investigation by the AFP has generated international attention, with Wikileaks previously publishing suppressed court documents showing the connection of high ranking Malaysian and Indonesian officials to the case.

More recently, the OECD has examined the delays that have dogged the Rune prosecution, along with delays involving other investigations by the AFP into similar offences, to press Australia to continue to improve its anti-corporate corruption system. Both the federal government and the ALP have promised reforms to improve the investigation and prosecution of cases involving alleged international financial crime.

Nick McKenzie is a leading investigative journalist. He's won Australia's top journalism award, the Walkley, seven times and covers politics, business, foreign affairs and defence, human rights issues, the criminal justice system and social affairs.